DTN Early Word Livestock Comments

Cattle: Steady Futures: Higher Live Equiv: $213.89 +4.03*

Hogs: Steady Futures: Higher Lean Equiv: $117.26 +1.38**

* based on formula estimating live cattle equivalent of gross packer revenue.

(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle futures looked like they were in trouble early Tuesday as grain prices were on the rampage higher. However, grain prices turned tail with most contracts closing lower. This relieved some of the pressure that has been on the market over the past two weeks. Very strong boxed beef prices Tuesday and further losses in grains Wednesday should provide support to futures. Traders will be cautious as the price charts still look ugly, but the bottom line is that demand is strong, and futures really should not have declined as much as they have. The April live cattle contract will close on Friday and is anticipating there will not be a jump in cash this week.

It seemed as if there was spread trading taking place Tuesday with 2021 futures contracts slightly lower and 2022 contracts higher. That seemed a bit backward as tightening supplies will be a greater concern as we move through the year and next year may potentially see an increasing supply. The very strong jump in cash Tuesday should have pulled futures higher, but traders are not yet confident to buy back into the market, looking at high grain prices. However, significantly lower grains overnight may change that attitude. Cutouts gained nicely, adding bullish support for higher prices. Technically, the market is trying to build a base in June and July. December 2021 through July 2022 made new contract highs, keeping the uptrend alive and well.

	BULL SIDE		BEAR SIDE
1)	June live cattle futures are at a discount to cash. Strong demand and higher boxed beef should provide support to regain some of the losses.	1)	Cattle futures could not hold the strength they had at one point Tuesday, falling back into negative territory by the close. This could indicate further weakness.
2)	Weakness of grain prices should allow cattle futures to find some buying interest as fundamentals of the cattle market have not changed very much.	2)	Cash may hold steady at best, but there is a strong possibility for lower prices again this week.
3)	Hog futures held well Tuesday, but strong cash and higher cutouts should bring traders back in to buy the break. There is no opportunity to buy a break in later contracts as they make new highs.	3)	Nearby hog futures may have a difficult time moving back to the highs as cash may begin to settle down as packers hold the line.
4)	Technically, hog futures look bullish and are poised to regain the losses as technical traders step up and buy.	4)	Demand has not backed off yet, but soaring cash may soon reach that level both domestically and internationally.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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